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Jury Awards Class $454 Million in Consumer Fraud Case

In order for the rule of law to be effective in society, the consequences of breaking the law must be large enough to deter offenders. In the criminal system, the punishment for crime can be anywhere from paying fines to the death penalty. On the other hand, the civil system mostly deals with monetary damages and injunctive relief, which includes changes in policies or other non-monetary remedies. When determining monetary damages, there are two key factors: actual damages that were lost by the plaintiff and punitive damages that are meant to punish the defendant.

On April 7, 2017, a jury awarded $454 million to a class of consumers against Kimberly-Clark Corp. ("Kimberly-Clark") and its spinoff, Halyard Health Inc. ("Halyard Health" and collectively, with Kimberly-Clark, the "Company"), for misrepresenting the impermeability of its MicroCool surgical gowns. Of the award, $450 million was for punitive damages, which exceeded the $4 million in compensatory damages by more than a hundredfold. The incredibly large punitive damages may be indicative of the jury's determination to send a message to companies that are found to knowingly violate laws.

On behalf of any persons or entities in California that purchased MicroCool gowns between February 2012 and January 2015, Bahamas Surgery Center, LLC ("Bahamas Surgery Center") first filed its class action because the Company's surgical gowns did not provide the quality that was promised. Plaintiffs provided documents that showed the Company's concerns about the quality of its gowns and testing failures. In one document, a presentation given to the Company's CEO, Tom Falk, revealed that "the company had 80 compliance challenges on gowns that were delaying progress on cost savings." Additionally, an electronic instant message chat revealed a Kimberly-Clark senior research scientist asking a manager to create a pretext for rerunning tests.

The Company defended the seemingly incriminating documents by arguing the documents discussed the Company's goal to meet the Association for the Advancement of Medical Instrumentation ("AAMI") level four standards, which go above and beyond the current safety guidelines. Level four of AAMI standards is the highest rank for protective apparel, particularly in high-risk infection situations.

Although no physical harm had been reported, the misrepresentation of the gowns' permeability put care workers at substantial risk when they believed their apparel would protect them against pathogens, such as Ebola. Large punitive damages awards in class actions is unusual and one that has not been fully resolved by the courts. It is unclear if the court will reduce the punitive award, or if the Company will appeal.

The legal team at SFMS has significant experience litigating class action matters. If you have any questions regarding this subject or this posting, please contact Nick Lussier (nlussier@sfmslaw.com) or Chiharu Sekino (csekino@sfmslaw.com). We can also be reached toll-free at (866) 540-5505.

Shepherd, Finkelman, Miller & Shah, LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, and Pennsylvania. SFMS is an active member of Integrated Advisory Group (www.iaginternational.org), which provides us with the ability to provide our clients with access to excellent legal and accounting resources throughout the globe. For more information about our firm, please visit us at www.sfmslaw.com.

SOURCES

Eslinger, Bonnie. "Jury Hits Kimberly-Clark, Halyard With $454M Fraud Verdict." Law360. Last modified on April 7, 2017.

Field, Emily. "$454M Gown Verdict Says Jury Can Be Swayed Without Harm." Law360. Last modified on April 12, 2017.

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